chapter 8
Aggregate demand curves are Select one: a. downward sloping. b. upward sloping. c. horizontal. d. vertical.
A
An increase in the money supply may __________ total expenditures, leading to a __________ shift of the AD curve. Select one: a. increase; rightward b. increase; leftward c. decrease; rightward d. decrease; leftward
A
If consumption changes because of a change in the price level, then the Select one: a. economy moves from one point on an AD curve to another point on the same curve. b. AD curve shifts. c. economy moves from one point on a SRAS curve to another point on the same curve. d. SRAS curve shifts. e. none of the above
A
If investment changes because of a change in the price level, then the Select one: a. economy moves from one point on an AD curve to another point on the same curve. b. AD curve shifts. c. economy moves from one point on a SRAS curve to another point on the same curve. d. SRAS curve shifts. e. none of the above
A
If some of a person's wealth is in cash, it follows that Select one: a. this person's monetary wealth will change as the price level changes. b. this person's monetary wealth will not change as the price level changes. c. this person is wealthier than a person who holds all his wealth in nonmonetary form. d. a and c e. b and c
A
Refer to Exhibit 8-3. Which of the following could not have caused a shift in aggregate demand from AD1 to AD2? Select one: a. a change in the price level b. an increase in wealth c. an increase in foreign real national income d. a decrease in personal income taxes e. a decrease in business taxes
A
Suppose the real exchange rate of 105 Japanese yen to the dollar moves to 115 yen to the dollar. The dollar has _________________, making Japanese goods __________ expensive for Americans. Select one: a. appreciated; less b. appreciated; more c. depreciated; less d. depreciated; more
A
The expectation of higher future income is a Select one: a. rightward shifter of the AD curve. b. leftward shifter of the AD curve. c. reason for moving up along a given AD curve. d. reason for moving down along a given AD curve.
A
The interest rate effect is one of the Select one: a. reasons why an AD curve is downward-sloping. b. shifters of an AD curve. c. reasons why a short-run aggregate supply curve can be derived. d. shifters of a short-run aggregate supply curve.
A
The real balance effect is one of the Select one: a. reasons why an AD curve is downward-sloping. b. shifters of an AD curve. c. reasons why a short-run aggregate supply curve can be derived. d. shifters of a short-run aggregate supply curve.
A
Velocity is the average number of times a dollar is spent to buy Select one: a. final goods and services in a year. b. final and intermediate goods and services in a year. c. final goods, but not services, in a year. d. services in a year.
A
As the interest rate rises, the cost of a given investment project __________ and businesses invest __________. Select one: a. rises; more b. rises; less c. falls; more d. falls; less
B
A fall in the price level changes the purchasing power of money. This is relevant to the __________ effect. Select one: a. international trade b. real balance c. aggregate demand d. interest rate e. aggregate supply
B
A rise in foreign real national income tends to raise U.S. __________, shifting the U.S. AD curve to the __________. Select one: a. exports; left b. exports; right c. imports; left d. imports; right
B
A short-run aggregate supply curve shows the Select one: a. amount of a particular good producers are willing and able to buy at a particular price, ceteris paribus. b. real output (Real GDP) producers are willing and able to sell at different price levels, ceteris paribus. c. real output (Real GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. d. real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus.
B
An increase in labor's productivity will cause the SRAS curve to shift __________ and the price level to __________. Select one: a. leftward; increase b. rightward; decrease c. rightward; increase d. leftward; decrease
B
An increase in the price of nonlabor inputs Select one: a. shifts the AD curve leftward. b. shifts the SRAS curve leftward. c. is the same thing as a beneficial supply shock. d. shifts the AD curve rightward. e. shifts the SRAS curve rightward.
B
Assume that the economy is originally in equilibrium at point A. If businesses become more optimistic about future sales, at which point is the economy most likely to end up in the short run? Select one: a. A b. B c. C d. D
B
Business optimism about future sales tends to __________ investment expenditures, shifting the AD curve to the __________. Select one: a. increase; left b. increase; right c. decrease; left d. decrease; right
B
Ceteris paribus, Real GDP and the unemployment rate are Select one: a. directly related. b. inversely related. c. unrelated. d. directly related when GDP is below its natural level and inversely related when GDP is above its natural level.
B
Greater wealth makes people _____________ willing to spend, causing __________ the economy's AD curve. Select one: a. more; movement down along b. more; a rightward shift of c. less; movement up along d. less; a rightward shift of
B
If consumption changes because of a change in a factor other than the price level, then the Select one: a. economy moves from one point on an AD curve to another point on the same curve. b. AD curve shifts. c. economy moves from one point on a short-run aggregate supply (SRAS) curve to another point on the same curve. d. SRAS curve shifts. e. none of the above
B
If investment changes because of a change in a factor other than the price level, then the Select one: a. economy moves from one point on an AD curve to another point on the same curve. b. AD curve shifts. c. economy moves from one point on a short-run aggregate supply (SRAS) curve to another point on the same curve. d. SRAS curve shifts. e. none of the above
B
One of the reasons why the AD curve slopes downward is that as the Select one: a. price level rises, purchasing power rises. b. price level falls, purchasing power rises. c. nation's income level rises, purchasing power rises. d. nation's income level rises, purchasing power falls. e. This is a trick question, because the AD curve is upward sloping.
B
Suppose consumption decreases at each price level. As a result, aggregate demand __________, and the AD curve shifts __________. Select one: a. increases; leftward b. decreases; leftward c. increases; rightward d. decreases; rightward
B
Suppose that C = $700, I = $200, G = $200, NX = $100, and that the money supply is equal to $400. Based upon these assumptions, velocity is equal to ________________. If consumption and velocity both rise beyond their initial levels, then it follows that another component of spending ___________ necessarily fall. Select one: a. 3; must b. 3; does not c. 4; must d. 4; does not
B
The expectation of lower future prices is a Select one: a. rightward shifter of the AD curve. b. leftward shifter of the AD curve. c. reason for moving up along a given AD curve. d. reason for moving down along a given AD curve.
B
The real balance effect helps to create "a change in Select one: a. aggregate demand." b. the quantity demanded of Real GDP." c. aggregate supply." d. the quantity supplied of Real GDP."
B
An increase in the interest rate __________ purchases of consumer __________. Select one: a. increases; durables b. increases; nondurables c. reduces; durables d. reduces; nondurables
C
Business taxes fall. This raises __________, which raises __________ and the __________ curve shifts rightward. Select one: a. consumption; aggregate demand (AD); AD b. investment; government purchases; AD c. investment; aggregate demand (AD); AD d. net exports; aggregate demand (AD); AD e. none of the above
C
Changes in which of the following will not cause the SRAS curve to shift? Select one: a. the wage rate b. prices of nonlabor inputs c. the price level d. productivity e. All of the above will cause the SRAS curve to shift.
C
If foreign input prices increase and the United States purchases those inputs, then the U.S. Select one: a. AD curve will shift leftward and U.S. prices will fall. b. AD curve will shift rightward and U.S. prices will rise. c. SRAS curve will shift leftward and U.S. prices will rise. d. SRAS curve will shift rightward and U.S. prices will fall
C
One reason the AD curve is downward sloping is the __________ effect. Select one: a. wage rate b. productivity c. interest rate d. structural e. none of the above
C
Suppose the price level is rising and it is widely forecast to rise even further. This forecast might cause __________ of some consumption plans, resulting in __________ the AD curve. Select one: a. postponement; a rightward shift of b. postponement; a leftward shift of c. acceleration; a rightward shift of d. acceleration; movement down along
C
Suppose the real exchange rate of 105 Japanese yen to the dollar moves to 115 yen to the dollar. The dollar has _________________, making Japanese goods __________ expensive for Americans. Select one: a. appreciated; less b. appreciated; more c. depreciated; less d. depreciated; more
C
The product of ____________________ and _________________ is equal to the total amount of spending in an economy. Select one: a. the money supply; the price level b. velocity; the price level c. the money supply; velocity d. velocity; the level of output
C
Which of the following will not lead to a leftward shift in the SRAS curve? Select one: a. an increase in wage rates b. an increase in the prices of nonlabor inputs c. an increase in productivity d. an adverse supply shock
C
An aggregate demand (AD) curve shows the Select one: a. amount of a particular good people are willing and able to buy at a particular price, ceteris paribus. b. real output (Real GDP) people are willing and able to sell at different price levels, ceteris paribus. c. real output (Real (GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. d. real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus.
D
An appreciation of the U.S. dollar tends to __________ U.S. net exports and shift the U.S. AD curve to the __________. Select one: a. raise; right b. raise; left c. lower; right d. lower; left
D
As income taxes rise, disposable income __________, causing __________ the AD curve. Select one: a. increases; movement down along b. increases; a rightward shift of c. decreases; movement up along d. decreases; a leftward shift of
D
As the interest rate rises, businesses invest __________ and the AD curve shifts to the __________. Select one: a. more; right b. more; left c. less; right d. less; left
D
Assume the economy is originally in equilibrium at point A. If the price of oil rises, at which point is the economy most likely to end up in the short run? Select one: a. A b. B c. C d. D
D
If the price level remains constant but the wage rate increases, then there will be __________ in production and the SRAS curve will shift __________. Select one: a. an increase; rightward b. a decrease; rightward c. an increase; leftward d. a decrease; leftward
D
If wage rates rise at the same time that labor productivity increases, what is the effect on short-run aggregate supply (SRAS)? Select one: a. SRAS rises. b. SRAS falls. c. SRAS remains constant. d. SRAS may rise, fall, or remain constant.
D
Personal income taxes rise. This lowers __________, which lowers __________ and the __________ curve shifts __________. Select one: a. net exports; aggregate demand (AD); AD; leftward b. consumption; short-run aggregate supply (SRAS); SRAS; rightward c. government revenue; net exports; AD; rightward d. consumption; aggregate demand (AD); AD; leftward e. none of the above
D
Refer to Exhibit 8-1. Assume the economy is originally in equilibrium at point A. If wage rates rise, at which point is the economy most likely to end up in the short run? Select one: a. A b. B c. C d. D
D
Refer to Exhibit 8-4. Which of the following could not have caused a shift in aggregate supply from SRAS1 to SRAS2? Select one: a. an increase in productivity b. a beneficial supply shock c. a decrease in the price of a nonlabor input d. a change in the price level e. a decrease in wage rates
D
Starting from short-run equilibrium, the following occurs: personal income taxes are cut, business taxes are cut, and labor productivity rises. What is the effect on the price level and Real GDP in the short run? Select one: a. Real GDP rises and the price level necessarily falls. b. Real GDP rises and the price level necessarily rises. c. Real GDP falls and the price level necessarily remains the same. d. Real GDP rises and the effect on the price level cannot be determined. e. Real GDP rises and the price level necessarily remains the same.
D
Starting from short-run equilibrium, the following occurs: the U.S. dollar depreciates and wage rates rise. Moreover, the effect on the economy from the dollar depreciating is stronger than the effect on the economy from rising wage rates.What is the effect on the price level and Real GDP in the short run? Select one: a. The price level falls and Real GDP falls. b. The price level rises and Real GDP falls. c. The price level falls and Real GDP rises. d. The price level rises and Real GDP rises. e. none of the above
D
Suppose a drop in stock prices makes people feel less wealthy. This would cause __________ the economy's AD curve. Select one: a. movement down along b. movement up along c. a rightward shift of d. a leftward shift of
D
The change in the purchasing power of dollar-denominated assets (such as cash holdings) is the Select one: a. money effect. b. interest rate effect. c. asset effect. d. real balance effect. e. none of the above
D
The real balance effect describes the change in Select one: a. checking account balances that occur when the money supply increases or decreases. b. the value of physical assets (e.g., houses) that results from a change in the price level. c. the output producers produce as they attempt to balance their production in response to changes in consumers' demand. d. the value of cash holdings that results from a change in the price level. e. the balance of cash holdings that results from a change in the amount of income earned.
D
The short-run aggregate supply curve is ________ and the long-run aggregate supply curve is _________. Select one: a. upward sloping; horizontal b. vertical; upward sloping c. vertical; horizontal d. upward sloping; vertical e. none of the above
D
Which of the following is an example of an adverse supply shock? Select one: a. a nationwide drought lasting for many months b. an outbreak of war among several of the Middle Eastern oil-producing countries c. an influenza virus that affects 50 percent of the labor force for two weeks d. a, b, and c e. a and c
D
Which of the following statements is false? Select one: a. If the SRAS curve shifts rightward, the price level falls in the short run. b. If AD rises and SRAS is constant, the price level rises in the short run. c. If both SRAS and AD decline, Real GDP falls in the short run. d. If both SRAS and AD increase, the price level necessarily rises in the short run. e. none of the above
D
Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve? Select one: a. a change in consumption b. a change in government expenditures c. a change in net exports d. a change in the price level e. all of the above
D
A rise in wage rates Select one: a. causes the AD curve to shift leftward. b. causes the short-run aggregate supply (SRAS) curve to shift rightward. c. does not affect the present position of the SRAS curve. d. causes the AD curve to shift rightward. e. causes the SRAS curve to shift leftward.
E
An economic policy initiative results in the AD curve shifting to the right. As a result, Select one: a. the price level will rise. b. the price level will stay constant. c. the price level will fall. d. Real GDP will rise in the short run. e. a and d
E
Which of the following factors can shift the AD curve? Select one: a. net exports b. government purchases c. the money supply d. b and c e. a, b, and c
E
Which of the following is not a factor that can shift the short-run aggregate supply curve? Select one: a. changes in the wage rate b. changes in the price of energy c. changes in the stock of capital goods d. improvements in management techniques e. none of the above
E
Which of the following statements is false? Select one: a. Real GDP is the quantity of goods and services valued in base-year prices or base-year dollars. b. "Aggregate demand" and the "quantity demanded of Real GDP" are the same. c. According to the aggregate demand (AD) curve, the quantity demanded of Real GDP and the price level are inversely related. d. Real GDP is denominated in current-year prices. e. b and d
E
Which of the following would cause a rightward shift in the AD curve? Select one: a. an increase in the price level b. a decrease in the price level c. an increase in imports d. a decrease in the quantity of money available in the economy e. an increase in government purchases of goods and services
E
